Inflation comes back to life (November 22, 1989)

Higher gasoline and food costs pushed consumer prices up 0.5 percent last month the biggest inflation spurt since last May the Labor Department said Tuesday

1 ne increase in tne consumer price index which translated into an annual infla tion rate of 5.9 percent followed four months of modest monthly gains of 0.2 percent or less The government blamed the price spurt which was slightly worse than expected on jump in gasoline costs higher prices for new cars and sharp turn around in fruit and vegetable prices Through the first 10 months of this year consumer prices have risen at an annual rate of 4.6 percent up only slightly from the 4.4 percent price gains recorded in both 1987 and 1988. While October's spurt in pric es was slightly higher than many economists had been expecting they nonetheless said it confirms view that inflationary pressures are on the rise Inflation is creeping upwards said Frank McCor- mick senior economist at Bank of America in San Francisco

We see the underlying rate of inflation going to around 5 per cent year The price gains were broadly distributed said Charles Lieberman director of financial markets research at Manufacturers Hanover Securi

ties Corp The momentum be hind inflation remains pretty strong Still few analysts are predict ing that the price increases will worsen beyond annual rates of around 5 percent Underlying inflationary pres sures had been masked during the summer because of big de clines in energy prices With en ergy prices now rebounding somewhat analysts predicted that inflationary pressures will be intensifying in coming months Chicago's Duff Phelps Inc an investment and credit rating firm was gloomier saying there is considerable precedent for recession in 1990. The economy has momen tum of its own and since the trend remains negative we be lieve that the downturn will con tinue until we are in reces sion said Robert Milne president of Duff Phelps' In vestment Management Co Leading the October advance in the consumer price index was 0.9 percent seasonally adjusted jump in gasoline costs the big gest increase since 3.9 percent surge in May Gasoline prices See Inflation pg 4

Chicago Tribune Graphic Source Bureau of Labor Statistics

Inflation

Continued from page 1 have been on roller coaster this year soaring by 21.2 percent in the first five months of the year and then falling by 9.3 percent from June through September Food costs were up 0.4 percent in October the biggest advance since 0.6 percent rise in May Fruit and vegetable prices jumped 1.2 percent reflecting higher costs for apples and bananas Dairy products posted huge gain for the second straight month rising 1.8 percent for the biggest advance since May 1980. Consumer prices after discount-' ing food and energy also rose by 0.5 percent Many analysts con sider this to be better indication of the underlying inflation rate be cause it removes the effects of two of the most volatile categories In second report the Labor Department said Americans' aver age weekly earnings rose 4 percent in October from year earlier but buying power actually fell In the same period prices advanced 4.5 percent After inflation the department said weekly earnings fell 1.5 per cent in construction dropped 2.3 percent in manufacturing eased 0.8 percent in transportation and declined 1.4 percent for retail workers in the year ended Oct 3 1 But weekly wages after inflation advanced 3 percent in the mining industry 1.2 percent in finance and 1.4 percent in services Wholesale trade workers' weekly earnings also inched up 0.2 per cent